Behavior Analysis, Out-of-Band Authentication Best Fraud Deterrents: Report

By Heun, David | American Banker, November 1, 2011 | Go to article overview

Behavior Analysis, Out-of-Band Authentication Best Fraud Deterrents: Report


Heun, David, American Banker


Byline: David Heun

Using an effective yet nonintrusive online banking data-security method is critical for financial institutions as fraud-prevention capabilities increasingly become key factors in customer choice, a fraud expert suggests in a recent report.

Banks face "a balancing act" in how they inform a prospect about data-security methods because there is a danger of scaring them off if they view the methods as too complex or too lackadaisical, says Julie Conroy McNelley, senior analyst with Aite Group and author of "Online Fraud Mitigation: Tools of the Trade."

"No one has perfected the equation yet," she adds.

The report analyzes the effectiveness of various fraud-protection devices banks use to protect customers' online-banking sessions. McNelley interviewed fraud-management executives from 32 North American financial institutions to compile the report.

The report examines behavior analysis, knowledge-based authentication, one-time password tokens, complex device printing, and out-of-band authentication as key online fraud-prevention measures.

Of those measures, financial institutions viewed behavior analytics and out-of-band authentication as effective and controllable measures, the report states.

Banks favor behavior analytics, which monitors what a customer tends to do during an online-banking session and establishes guidelines for that expected behavior, because it is effective and there is no intrusion on the customer, McNelley says.

"If someone comes online and tries to change a user name and then transfers money to that new user, then the bank knows that's a problem," McNelley says.

In using out-of-band authentication, the customer enters a one-time password when prompted during the online session and sends it to a mobile device or initiates a voice call to a mobile phone, McNelley explains.

The process shows interaction between two devices owned by the accountholder, and it would alert the owner if there is a problem if a message shows up that he did not send, McNelley adds.

"It's a great technology and highly effective," McNelley says.

Though one participating financial institution called out-of-band a "must have," others said it may be too difficult for customers to execute, and its effectiveness must be balanced with usability, the report states. …

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